Linkers see a strong rally as the RPI changes are confirmed for 2030

Today Chancellor Sunak set out the Spending Review. There was little in the way of news on fiscal spending measures and conventional gilts have largely brushed off the headlines about the sharp increases in borrowing in the years to come.

• However along with the announcement came the outcome of the RPI review. This was largely as expected in confirming that the RPI reforms would not come into effect until February 2030. This saw linkers secure a strong bid. The 0.125% Aug-28 linker has seen real yields fall from -2.807% to -2.931% at writing (a move of 12.4bp) while even linkers that were longer in maturity than 2030 have seen decent moves. For example, the longest-maturity linker, the 0.125% Mar-68, has seen yields fall from -2.017% to -2.067% at writing, a 5bp move.
• 2y yields down -1.2bp today at -0.36%
• 5y yields down -1.5bp today at 0.7%
• 10y yields down -2.1bp today at 0.308%
• 30y yields down -2.8bp today at 0.871%
• 2s10s down -0.9bp today at 34.4bp
• 10s30s down -0.7bp today at 56.3bp